Attention
is invited to para 19 of the Board’s Circular No.
54/2004-Customs dated 13.10.2004 which extends the facility of exemption from furnishing
bank guarantee by 100% Export Oriented Units (EOUs) at the time of import or
for sending goods on job work in Domestic Tariff Area (DTA).

2.In
terms of the provisions of para 6.12 (f) of FTP
announced on 31.8.2004, exemption was granted for 100% EOUs from furnishing
bank guarantee at the time of import or going for job work in DTA subject to
certain prescribed conditions to be followed by the unit. These conditions are
that (i) the unit has a turnover of Rupees 5 crores or above; (ii) unit is in existence for at least
three years; and (iii) unit is having an unblemished track record. Accordingly,
this was implemented by issue of instructions vide para
19 of the aforesaid Board’s Circular No. 54/2004-Customs.

3.It has
been brought to the notice of the Board that one of the conditions relating to
‘unblemished track record’ for grant of such exemption from furnishing bank
guarantee to 100% EOUs has been changed in the annual FTP amendments and the
same is not being properly implemented. It has been represented by the
exporters that Customs/ Central Excise field formations are insisting for Bank
Guarantee even for Status Holder EOUs on the ground that show cause notices
have been issued to them, thereby such units are unable to fulfill the condition
of ‘unblemished track record’.

4.1The
issue has been examined in the Board. The provisions of para
6.12 providing other entitlements to 100% EOUs was amended in the FTP changes
introduced w.e.f. 1.4.2008, and the said para 6.12 state the following:

*6.12. (f):Unit will not be required to furnish bank
guarantee at the time of import or going for job work in DTA, where unit has

(i) a turnover of Rs. 5 crores or
above;

(ii) unit is in existence for at least three years; and

(iii) The
unit:

(a)has achieved positive NFE / export obligation
wherever applicable;

(b)has not been issued a show cause notice or a
confirmed demand, during the preceding 3 years, on grounds other than
procedural violations, under the penal provision of the Customs Act, the
Central Excise Act, the Foreign Trade (Development & Regulation) Act, the
Foreign Exchange Management Act, the Finance Act, 1994 covering Service Tax or
any allied Acts or the rules made thereunder, on
account of fraud / collusion / willful mis-statement/
suppression of facts or contravention of any of the provisions thereof;

[*Note: The said para
has been re-numbered as 6.12(e) in the current FTP introduced w.e.f. 23.8.2010]

From the above it could be seen that there are four
conditions prescribed as (i), (ii), (iii)(a) and (iii)(b). The condition (iii) has been revised in
the FTP changes introduced w.e.f. 1.4.2008. While there
appears to be no difficulty for the trade and industry in complying with first
three conditions, in respect of condition at (iii)(b) it is represented that
mere issue of show cause notice on procedural non-compliance would not debar
them from the entitlements of bank guarantee waiver granted under para 6.12(f).

4.2It
could be seen from the provisions of para 6.12(f) sub-para (iii)(b) of FTP, that the
prescribed condition clearly excludes show cause notices or cases booked for
procedural violations. Hence, the entitlement of bank guarantee exemption to
100% EOUs / EHTP / STP / BTP units shall be denied only in cases involving
fraud/ collusion/ willful mis-statement/ suppression
of facts, whether or not extended period for issue of SCN has been invoked.
Further, any violation or contravention of any of the provisions of the Customs
Act, 1962 or Central Excise Act, 1944 or Finance Act, 1994 or other Acts
specified in para 6.12(f) of FTP or any Allied Acts
or Rules made thereunder, would also attract denial
or exemption from furnishing bank guarantee.However, in simple cases of issue of show cause notices for procedural
violation against such units, the entitlement of exemption from furnishing bank
guarantee to EOU/EHTP/STP/BTP units need not be denied. These units shall
continue to be eligible for availing the bank guarantee waiver mentioned in para 6.12(f) of the FTP, in view of the exclusion provided
therein.